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Introduction

As per section 285BA of the Income-tax Act, 1961, specified persons are required to report transactions prescribed under Rule 114E of the Income-tax Rules, 1962, which are registered or recorded on or after 1.4.2016, by furnishing statement of financial transaction in Form No. 61A. In respect of transactions registered or recorded in the Financial Year 2016-17, the statement of financial transaction has to be furnished by such persons on or before 31st May, 2017.

It may be noted that Rule 114E, substituted with effect from 1.4.2016, now requires any person who is liable for audit under section 44AB of the Income-tax Act, 1961 to report transaction of receipt of cash payment exceeding Rs. 2 lakh (per transaction) for sale of goods or services of any nature in the Financial Year 2016-17.

Rule 114E also requires a company issuing shares to report any transaction for receipt from any person (in any mode) for issue of shares of an amount aggregating to ten lakh rupees or more in a financial year (including share application money).

Analysis: Which transactions are covered?

Accordingly, if you have carried out any of the following transactions during the year, you are liable to furnish particulars of such transactions in Form 61A:

Receipt (in any mode: cash, cheque or otherwise) from any person of an amount aggregating to ten lakh rupees or more in a financial year for acquiring shares (including share application money) issued by the company.

A company issuing shares.

Receipt of cash payment exceeding two lakh rupees for sale, by any person, of goods or services of any nature (per transaction). [SFT – 013]

Any person who is liable for audit under section 44AB of the Act.

Now, for reporting receipt of cash payment exceeding two lakh rupees for sale [SFT- 013], a question arises, what should be considered as a “transaction”.

As per subsection (3) to the section 285BA of the Income-tax Act, “specified financial transaction” means any “transaction of purchase, sale or exchange of goods or property or right or interest in a property or trasaction for rendering any service or works contract or ……… …..”.

Hence, in my opinion, for the purpose of rule 114E read with section 285BA, in context of SFT – 013, value to considered shall be value of single invoice. That is, if an invoice is for any amount exceeding Rs.2 lakh and cash payments are recieved in parts aggregating to more than Rs. 2 lakh, the said transaction is liable to be reported.

Also, if a single cash payment for more than Rs. 2 lakh is received, then irrespective of the amount of invoice/ invoice(s), it should be reported.

Other information

In this context, for your reference and records, the procedure for registration and submission of statement of financial transactions as per section 285BA of Income-tax Act, 1961 read with Rule 114E of Income-tax Rules, 1962, contained in CBDT Notification No. 1/2017 dated 17/1/2017, is available at http://www.incometaxindia.gov.in/communications/notification/systemnotification1_2017.pdf. This Notification also contains the details of the nature and value of transactions & class of persons who are required to report such transactions.

Note

This article is written in context to only companies and persons liable to audit under section 44AB of the Income-tax Act. The scope of rule 114E is wide and covers other persons and other transactions too.

Users are advised to obtain an expert opinion before furnishing Form 61A.

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The Madhya Pradesh VAT (Amendment) Act, 2016 has been passed and made applicable with effect from 05/04/2016. Some of the important amendments are explained below. Clients are advised to go through the following article carefully and make necessary updates in their business process.

Amendment in Provisions related to ITR on goods sold in interstate trade or commerce:

Scenario till 04/04/2016: ITR on local purchase was allowed in full when such goods were sold in interstate trade or commerce.

Now: ITR to be allowed on purchase of goods for interstate sales shall be lower of:

CST collected on such sales or

VAT on purchase price of goods.

Persons Affected: Traders who are purchasing goods from local market in Madhya Pradesh and selling them in the course of interstate trade of commerce.

Persons who are NOT affected: Fortunately, manufacturers are not covered under above amendment.

Goods on which above provision is applicable: All goods specified in Schedule II except Part-III and III-A.

Impact:

Traders supplying goods in the course of interstate trade or commerce will have to increase the prices of the commodities so as to recover loss of ITR. Particularly, items covered under 14% VAT will see a considerable price change. This will adversely affect demand from other states.

Importance of Form – C will be reduced. Traders will prefer to raise bills on full VAT rate so as to claim full ITR on purchase.

To sum up ‘a’ and ‘b’, benefit of sale against Form-C will be nullified. Hence, there may be a reduction in demand from buyers of other state.

As the benefit of ITR will be reduced, traders may start to prefer to procure supplies from outside Madhya Pradesh over local market.

Customer base of small traders may get shifted to direct manufacturers on whom this provision is not applicable.

TDS on purchase made by Limited Cos and various government bodies, recognized educational institutions:

Scenario till 04/04/2016: Only Central Government, State Government and notified PSU were required to TDS on all purchase above Rs.5000/-. TDS is to be done at the time of credit or payment, whichever is earlier. Tax deducted has to be deposited in Challan Form 27/ 27-A on or before 10th of next month.

Now: Scope of this provision has been widened to include:

Public Limited Cos.

All PSUs

Authority constituted under law relating to local authority including gram panchayat, janpad panchayat and zila panchayat

Authority constituted under any law for the time-being in force.

All dental colleges recognized by dental council of India and hospitals associated to such dental colleges.

All medical colleges recognized by MCI and hospitals associated to such medical colleges

All recognized universities.

Persons affected: Vendors supplying goods to above organizations.

Additional Efforts now required:

Organizations will have to deposit tax on 10th of next month of purchase irrespective of payment condition with the vendor.

Tax will have to be deducted irrespective of the fact whether tax has been mentioned separately on the invoice or not. (eg- invoices of petrol pumps, small retailers etc.)

Tax will have to be deducted even on invoices of unregistered dealers. However, ITR will not be available on these invoices.

Separate challan has to be paid for each vendor.

Return (statement of TDS and its payment) in Form 35 will have to be filed by the organizations annually.

Impact:

Cash-flow of vendors who supply goods only to limited companies will be adversely affected

Huge credits of ITR will remain unutilized due to TDS

Organizations will have to deposit tax on 10th of next month of purchase irrespective of payment condition with the vendor that may be 3 months or so.

Tax liability of the vendor/supplier will remain as such until he obtains and furnishes TDS certificate and challan to the department. Hence, vendors/suppliers will be at mercy of the organizations to deposit TDS at time and generate certificate on time.

Separate challan has to be paid for each vendor. Hence, huge number of challans will have to be prepared and paid. Organizations will have to employ additional staff for managing and paying TDS challans.

Small dealers supplying goods to above organizations who were enjoying basic exemption of Rs.10 lacs will also be caught in this provision. In addition to above, TDS on purchase from URD will indirectly cause double-taxation and consequently will lead to increase in prices.

Day-to-day transactions of misc purchase of consumables will be hit and may result in slower working of above organizations.

Saving Provision: Section 27 provides an option to vendor for obtaining and furnishing a certificate of lower deduction/NIL TDS. However, application Form 33 required for applying for above certificate needs to be modified suitably so as to include above organizations. Hope, state government soon notifies a new and updated Form 33.

Faster Disposal of Applications for reopening of ex-parte assessment case:

A sixty-day deadline from the date of application has been prescribed for disposal applications for reopening of cases for which ex-parte assessments have been done.

Changes in tax rates:

Rate Reduced:

Bio-insecticides and bio-pesticides are now chargable to NIL tax.

Dry ber and ber powder are now chargable to NIL tax.

All kind of electric/battery run two wheelers, car and rickshaw are now chargable to NIL tax. (earlier rate – 5%)

Milking machine are now chargable to NIL tax.

Bags and envelops made of biodegradable material are now chargable to NIL tax.

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One of the items specified under notification no. 25 dt. 31-03-2006 for downloading Form-49 is “Hardware Goods”. The term hardware can cover variety of goods. Due to this, registered dealers sometimes fall in dilemma that whether or not there product will be covered under Hardware Goods.

On going through the said decision, it is clear that every article that is made of iron or other base metal cannot be regarded as an article of hardware. The Honourable High Court has, after considering literature in some of the then popular trade journals and catalogues of hardware items, like “British Empire Trade Index” and the “Bombay Market” has clarified that hardware items shall include the following:

Relevant portion of the said decision is shared below for reference of our clients and professional colleagues.

Readers are requested to note that above decision does not give an exhaustive or complete list of all goods that are to be covered or not to be covered under hardware items but it may provide guidance in case of litigation or problems at check-post.

Many of the assessee’s who are running small-scale business do not require TAN. However, as per revised reporting requirements, mentioning TAN is compulsory in Form 3CD for reporting whereever any of the payments covered under Chapter XVII-B /BB are made by the assessee.

As per latest available official utility of Income-tax Department, “DTAN99999T” can be entered in TAN field in clause 34(a) of Form 3CD where TAN is not available. All professionals are advised to enter this TAN instead of skipping the field incase of non-availability of TAN.

A new entry has been inserted in Part III of Schedule II to the MP VAT Act “6. Telephone, Cellular hand set and Phablet 13%” w.e.f. 26/04/2014.

What happens when some goods are listed in Part III of Schedule II?

When any goods which are listed in Part III of Schedule II to the MP-VAT Act are sold by a registered dealer of MP within the state of Madhya Pradesh, they become “tax paid goods”. That is, once VAT has been charged on these goods in the state of MP, VAT cannot be levied again on subsequent sale of these goods. Of-course, ITR is not available on such goods.

Now what has to be done by the dealers dealing in these goods?

i. dealers will have to reverse ITR claimed on stock lying with them at the end of 25/04/2014.

ii. they will have to differentiate stock purchased from within M.P. and from outside M.P. as they cannot charge VAT on sale of above goods purchased from regd. dealer of MP, however, on the other hand, VAT is to be charged and deposited for goods purchased from outside MP. The positive aspect of this amendment is that this will be curb the grey market where tax evasion was being done by selling goods without bill.

iii. when these goods are sold interstate, 13% CST is payable where sale is done without Form-C. This is the worst blow that this notification has given to the dealers. Due to lack of specific exemption provisions in respect of tax paid goods sold without Form -C in the CST Act, a situation of double taxation has arisen. The dealer cannot claim ITR as per provisions of VAT Act and has to again charge 13% on the interstate sales as per provisions of the CST Act. Due to this, in our opinion, online retailers based in M.P. will face tough competition from other states and will have to cut down their margins in order to survive. Also, this will create a huge price gap between tablets of same config. with and without sim models.

However, it is to be noted that these goods when sold interstate against C-Form shall be exempt from CST by virtue of notification number 05-2013 dated 26/03/2013 which was originally valid till 31/03/2014 and now extended upto 30/06/2014.

Note: Above article is based on personal opinion of the author. We shall be glad to hear from you if you differ from our opinion or have a solution to problem of double taxation.

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Advance tax is to be paid by all the assessees whose annual tax liability is more than Rs.10,000. The date for last installment of advance tax for F.Y. 2013-14 i.e. 15th March 2014 is not far away now.

All the assessees (both company and non-company) are advised to estimate there tax liability for current financial year and deposit the 100% of estimated tax liability after netting off previous advance tax payments and TDS done by deductors (already made and estimated during march) on or before 15th March 2014.

Payment is to be made through challan number 280 by selecting Advance Tax (100) as type of payment and period as Assessment Year 2014-15.

Should you require any assistance in computing your annual tax liability, feel free to drop a mail with relevant details.

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MP commercial tax department has updated template for e-filing Form-10 (VAT return) w.e.f. 27/12/2013 in view of large number of ITR mismatch cases being observed recently. Important changes are reported below for ease of our clients and professional colleagues:

Now sales list has to be submitted along with invoice number and invoice date. Though, presently these additional fields are optional, we request clients to kindly furnish the above additional information in excel format so as to enable us to file returns correctly.

Also, dealers are now required to reportpurchases of which they are not claiming ITR also along with other local purchases in the return (including purchases where TDS has been done). In other words, capital good purchases on which no ITR is admissible are also to be reported now.

Option to claim ITR on units basis is also made available for claiming ITR on sand, grit etc.

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VAT audit is mandatory for all dealers registered in the state of Madhya Pradesh having gross turnover of Rupees Ten Crores or more. For F.Y. 2012-13 and onwards, VAT audit report is to be compulsorily filed online by uploading the audit template below on online portal of M.P. Commercial Tax Department.

We have prepared a basic list of requirements and have tried to cover all relevant information to be called from clients which can be downloaded from this link (VAT AUDIT Requirements)

All the clients are requested to go through the attached list and submit the information at the earliest.

Last date of filing VAT audit report for FY 2012-13 is 15th Nov 2013. However it is worth noting that last date of filing revised VAT/ET/CST returns for F.Y. 2012-13 is 30th October 2013. No notification for extension of same has been issued yet.